In mid-November, we learned that Fidelity marked down the value of its Snapchat investment by 25%, which instantly reignited the tech bubble conversation. We may be in a bubble, but this event is not an indicator. What this mark down does reveal is a shift in investment strategy for large investment funds.

In the past few years, many high growth startups have delayed going public in favor of private capital to allow them to grow without the scrutiny of public reporting. As a result, Fidelity, who invested in both Google’s (up 1,400%+) and Facebook’s (up 180%+) IPO, has begun to invest in later stage private rounds to achieve comparable returns from tech startups. The 25% premium that Fidelity paid was the cost for access to Snapchat’s latest round of funding and potential Facebook like returns.

Had Fidelity not participated in this financing, their next opportunity to invest may not be until Snapchat’s eventual IPO, which could be 2 times the current price. If Fidelity believes that Snapchat is worth $150.00 per share, investing now — even if at a premium — is worth the upside versus waiting for an IPO.

Importantly, Fidelity takes a long term view on investing; they expect investments to generate an above market return over an extended period of time. They are able to withstand short term volatility because they believe in the fundamentals of the business and related industry (disappearing videos turned ad story model for millennials!). Their recent markdown of Snapchat is a result of their required quarterly mark to market valuation on all of their securities. It is not necessarily a reflection of their view of Snapchat’s long term value.

Extending this thinking to Facebook, Facebook endured early stock volatility — effectively a mark down — and now is generating above market returns.

Facebook’s public mark down.

Further, had Facebook delayed its IPO in favor of private capital, many investors like Fidelity would have missed out on the recent stock appreciation. Snapchat may never become Facebook, but Fidelity believes this company will last for more than a snap.

Note: Fidelity likely has preferred liquidation protection provisions in place that require its capital to be paid back first in the event of any downside scenarios.